Dutch Railways NS abused its dominant position in the 2014 tender process for the public-transport contract in the southern Dutch province of Limburg. The Netherlands Authority for Consumers and Markets (ACM) has imposed a fine of EUR 40,950,000 on NS.

Based on internal emails and other documents, ACM found that NS had submitted a lossmaking bid in order to obstruct its competitors. Chris Fonteijn, Chairman of the Board of ACM, explains: “The Dutch railway market can only function well if all market participants play by the rules. Over the past 20 years, regional tender processes in the Dutch public-transport sector have resulted in increased passenger volumes and in better service. Passengers ultimately benefit from better service. ACM believes a substantial fine is in order here.”

About the violations committed by NS

ACM has fined NS for two violations.

The first violation is that NS submitted a lossmaking bid in the 2014 tender process for the public-transport contract in the province of Limburg: the costs incurred by NS would be higher than its expected revenues from the regional contract in Limburg. As a result, the other bidders were not given a fair chance: they could not match or surpass NS’ bid without suffering losses themselves, even if they operated as efficiently as NS.

The second violation is a combination of several related actions:

NS used confidential information that it had obtained from a former director of rival operator Veolia, which operated the regional rail services in Limburg at the time of the regional tender process. At the time, this director was working indirectly for NS.

NS put its competitors at a disadvantage by responding slowly and providing incomplete answers in response to their requests for access to certain services and facilities at train stations. NS owns and operates facilities at its train stations such as service desks and employee break rooms. NS is required to offer its competitors access to these services and facilities.

NS passed on confidential information about its competitors Veolia and Arriva to its own subsidiary Abellio, through which NS participated in the tender process. Furthermore, NS withheld useful information about passenger revenues from its competitors, while its own subsidiary Abellio was allowed to use that information.

Preventing at all costs that competitors prove themselves

The Dutch Ministry of Infrastructure and the Environment treated the tender process in Limburg as a pilot for possible future decentralized contracts with multiple operators on the same railway tracks. For that reason, NS wanted to secure the Limburg contract at all costs. To achieve this, it obstructed its competitors. NS viewed the possibility of two railway operators sharing the same tracks in Limburg as a threat. In such a scenario, there would be a chance of proving that trains of a regional operator could successfully use the same tracks as the NS trains on the main railway network. And that would increase the odds of other parts of the main railway network being put out to tender in regional contracts at some point in the future. The province of Limburg had initially awarded NS the contract, but cancelled the award when irregularities in the tender process came to light. The province then awarded Arriva the contract.

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What went wrong in the tender process for the public-transport contract in the province of Limburg?

Bidders: Dutch Railways NS, Abellio, Arriva and Veolia.

The Charge: ACM has ruled that NS abused its dominant position. That is not allowed. ACM has therefore imposed a fine of almost EUR 41 million on NS.

Violation one: NS submitted a lossmaking bid. This resulted in unfair competition with the other bidders.

Violation two (combination of actions):
1. NS used confidential information that it had obtained from a former director of rival operator Veolia.
2. NS gave slow and incomplete answers in response to other bidders’ requests for access to services and facilities at train stations.
3. NS passed on confidential information about its competitors to its own subsidiary Abellio.

NS’s motive: NS wanted to win. NS viewed the possibility of two railway operators sharing the same tracks in Limburg as a threat. The tender process in Limburg acted as a pilot for possible future decentralized contracts. Therefore, other parts of the main railway network, too, could be put out to tender in regional contracts at some point in the future.

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What went wrong in the tender process for the public-transport contract in the province of Limburg?

Why do we have competition in the railway sector? For better service and more passengers.

Timeline:

2006 to 2016: Period of previous contract in province of Limburg. Veolia operates train and bus services.

2014: Limburg launches a public tender process for a new contract.

2015 to 2025: Period of the contract for the main railway network. Contract was directly awarded to Dutch Railways NS.

2016 to 2031: Period of new Limburg contract:

- Limburg initially awards it to Abellio (NS)
- Irregularities with regard to NS come to light
- Contract is awarded to Arriva
2019: Ministry of Infrastructure and the Environment performs mid-term review of the contract for the main railway network:
- Do NS’s performance levels meet the pre-defined standards laid down in the contract?
- Are more rail sections up for decentralization through public tendering? - What have been the experiences with the Limburg contract?